Yesterday, U.S. Bancorp (USB) announced the purchase of the existing credit card portfolio of The Kroger Co. (KR), a leading Cincinnati-based grocery retailer. This purchase comes as part of an expansion of its strategic relationship with Kroger.
 
U.S. Bank, the lead bank of U.S. Bancorp, has purchased the existing credit card portfolio of Kroger from RBS Citizens N.A. and is now planning to offer added financial services including innovative payments products to the Kroger customers. There was no disclosure of the terms of the deal.
  
U.S. Bank has had a strategic relationship with Kroger for the last 80 years and currently provides several retail, corporate banking, trust, capital markets and credit services for the latter.
  
U.S. Bancorp has a well-balanced business model, with non-interest revenues representing about half of its total revenues. Its results have been driven by a combination of acquisitions and organic growth. In the recent years, the company has been an active acquirer on the processing side of the business.
  
The payment business is expected to continue to help maintain growth in an otherwise unfavorable operating environment. Also, we expect continued investments in core banking and fee-based operations to generate long-term revenue growth.
 
 With a return on equity of 8.2% in 2009, U.S. Bancorp remains one of the more profitable large-cap banks in the industry. Its strong retail banking franchise and leadership in payment processing should continue to create growth opportunities over time.
  
Nevertheless, we think that the stress in the residential real estate market, weakness in the mortgage-related industries and the negative sentiment of commercial and retail customers related to the U.S. economy will continue to weigh on the shares in the coming quarters.
 
Read the full analyst report on “USB”
Read the full analyst report on “KR”
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